How To Use Insurance to Access Agricultural Financing

Poor funding is one of the biggest problems facing Nigeria's agric industry. Farmers simply can’t access enough credit to upgrade their subsistence level farming, buy farm machinery, and hire skilled labour.

Banks on the other hand are the moneybags with limitless sums of money lying idle in their vaults, looking at farmers with reproof and running after oil barons and telecom tycoons  to come over and have some. 

How then does insurance come into the equation?

Nigerians don’t like insurance. The word itself is a taboo to many of us. We don’t like the insurance companies, their cronies and their agents. We’ve been ripped-off so often by these sweet-talking fellows that it’s simply hard to think of insurance and not go crazy.

It is that bad, if not worse.

Yet it appears that insurance may be the last resort for farmers to be able to access financing to expand their business.

The point is banks, and in fact most financial institutions in the country, don’t like to grant credits to Nigerian farmers. To them, it’s too risky. And the investment is usually long term.

There are so many factors involved that are not completely controlled by the farmers. Weather, weeds, and what-have-you. Which may result in a low-yield or no-yield harvest. Which is bad news for the banks.

And you know the story of our moneylenders, they won’t lend if you can’t guarantee that you can pay back.

It is a matter to lose sleep about. 

Nigeria cannot continue to import food products such as wheat, rice, flour, fish, tomato paste, textile and sugar in large quantities when we have enough human and capital resources to produce them right here.

Banks however have shown the readiness to finance farmers who would consider insuring their agricultural activities.

Fortunately, gone are the days when only the Nigeria Agricultural Insurance Corporation (NAIC) had the license to underwrite agriculture insurance in the country.

Two years ago, NAICOM liberalized the insurance subsector which means that conventional insurers too can underwrite to the agricultural industry.

 

Currently, Nigeria’s formal financial system is lending about four per cent of all formal credit to the agricultural sector compared to three years ago when only about one per cent of all credit went to agriculture.

The improvement is small but it is noticeable and can be worked on.

As a farmer or business owner in the agric sector, you would be doing yourself a world of good by having a properly crafted insurance policy in place before approaching a lender. That way, your chance of exiting the building with a huge loan is increased.